Nikkei hits 4-week closing low on Europe worries

Japan's Nikkei average fell to a one-month closing low on Monday after downgrades of nine European countries, including a cut in France's triple-A rating, escalated fears over the region's ability to end its debt crisis.

Adding to market unease was an impasse in negotiations between Greece and private creditors on a debt swap deal, raising the risk of a Greek default in March when massive bond payments are due.

"Now markets are worrying about a possible downgrade of European banks and the region's bailout fund, which would make it even harder to raise capital," said Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities.

"It's as if Europe is in a dark spiral where people are discussing the worst case scenario for the euro zone," he said.

Against this backdrop, Japan's construction subindex outperformed the broader market as investors remained bullish that the sector would benefit from post-quake reconstruction spending.

Among construction companies, Taisei Corp climbed 1% to 206 yen, Kajima Corp gained 1.2% to 250 yen and Obayashi Corp advanced 0.6% to 359 yen.

The three companies carried a 12-month forward price-to-earnings ratio of between 14.4 and 16.3, data from Thomson Reuters Datastream showed. That compared with the construction sector's 11.6 and the broader Topix's 11.4.

Among the biggest%age gainers on the main board were Nippon Concrete Industries , which soared more than 30%, and Japan Bridge, up 19%.

By contrast, the benchmark Nikkei fell 1.4% to 8,378.36, back below its 25-day moving average near 8,467 after closing above the technical level on Friday.

Market participants said the only support came from heightened expectations of the Bank of Japan's buying of exchange-traded funds (ETFs) in afternoon trade.

The broader Topix fell 1.3% to 725.24.

US markets are closed on Monday for a national holiday and market players said it would be difficult to move without cues from Wall Street.